FERS Eligibility and Pension Calculation | Financial Planner | Christy Capital Management

Today we’re going over the eligibility and calculation for a FERS employee that’s retiring. When’s the soonest time you can retire? How do you figure out the math of what you’re going to get?

There are three eligibility requirements. There is MRA with 30 years of service based on your date of birth. You have to have achieved that age and have 30+ years of actual service.

The next qualification is you can be 60 years old with 20 years of actual service or you can be age 62 with at least five years of actual service.

The reason I keep saying actual service is because sick leave does count into your calculation and how you get paid, but sick leave does not count towards your eligibility. If you need to have 30 years of service, then you have to have 30 years of actual service and then sick leave can be added on top.

If you have 29 1/2 years of service with six months of sick leave, you are not eligible to retire. When you do the calculation, you’ll have 30 years of in the calculation, but you don’t have 30 years of qualifying service. So keep that in mind.

There is a way of retiring with MRA with only 10 years of service. So say you’re 58 years old and you have 10 years of service, you can retire under the MRA +10 provision. However, there will be penalties involved. For every year that you were under age 62 there will be a 5% penalty when doing the calculation and that penalty is permanent. Generally speaking, you don’t want to retire under this provision, as there are penalties.

Moving onto the calculation, if you’re a regular FERS employee you get 1% per year of service. So it’s your high three, which is the highest 36 months in a row of your income divided by three to get it an annual average, times your number of years of service, plus your sick leave, times 1%.

So for example if you have 30 years of service and you have one year of sick leave, your high three is $100,000, you would get 31% of your high 3 which would be $31,000 per year.

If you’re special provisions employees, then your percentage amount is different. Let's say maybe you’re air traffic control, or FBI or some version of special provision, you get to retire at age 50 with 20 years of service or at any age with 25 years of service. You will get 1.7% times your high three for the first 20 years and then the standard 1% for each year after that.

If you are confused with the term special provisions, then you're probably not one. So this, it is a two-step calculation. It would be your high 3 times 1.7% times 20 years, and then it would be the high 3 times 1% times the remaining years and you add those together to get your annual pension amount.

There is also an enhanced annuity. If you retire at age 62 with at least 20 years of service, you get what’s called the enhanced annuity. Ordinarily you would get 20 years or however many years of service times 1%, times your high 3. But if you’re 62 and with over 20 years of service, the enhanced annuity is your high 3 times 1.1%. Now the .1% doesn’t sound like a lot but it is actually a 10% raise. So generally speaking if you’re 61 1/2 years old and you have over 20 years of service, try to hang on to get to 62 so you can get your 10% increase.

If you’re trying to retire at 59 and you have plenty of money, then it’s probably not worth waiting three additional years to get the bonus. Because once you have enough, you have enough. But if you’re on the cusp of getting the enhanced annuity, you may want to stick around for it.

The information provided is not intended as tax or legal advice. Figures shown are for illustrative purposes only furthermore, the information nor the illustrations provided may not be used to avoid any tax penalties. This content represents the general views of Christy Capital Management and should not be regarded as personalized investment advice Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice. Retirement Benefits Institute, Inc., and a portion of its contents merged with Christy Capital Management Inc. Brandon Christy, former President of Retirement Benefits Institute, is also the current President of Christy Capital Management, Inc, a registered investment adviser.